Decentralised Finance (DeFi) — Oasis Network week #2 AMA Session with Luca Cosentino
The Oasis Network “AMA Session” is a Q&A session on the Oasis Network Community telegram group. This session has been designed to occasionally bring every community member up to speed on recent developments relating to the Oasis project and also create an avenue where every member’s questions and doubts can be addressed.
On August 19th, 2020, Luca Cosentino, the resident DeFi expert at Oasis, was live at the Oasis Network Week #2 online AMA Session to provide community members with insights on how the Oasis Network intends to provide fast, efficient, and secure DeFi transactions, and support the next generation of DeFi applications and Open Finance.
In order to ensure clarity to my readers, this article has been divided into three segments; the first segment gives a full account of the questions asked by the moderator of this AMA session (Jon Poole), the second segment, gives an account of the questions asked by the community members, while the third segment, gives an account of the questions asked by community members, which were answered by other members of the Oasis Network Team.
SEGMENT 1:
Jon’s Question — Does the Oasis Network have a vision for DeFi? Is it different from the mainstream view of DeFi?
Luca — The first generation of DeFi Dapps has provided the market with a huge number of protocols and primitives that are meant to support specific pieces of a new financial system. Despite the current focus on short term returns, the goal of DeFi application is to enable a new financial system that removes subjectivity, bias, and inefficiencies by relying on programmable conditions instead of status, wealth, and geography.
Oasis supports this vision and aims to support the next wave of DeFi with better privacy and scalability.
Jon’s Question — Does Oasis have tooling or infrastructure for DeFi?
Luca — We have built partnerships with players in each category that we deem relevant to the next gen of DeFi dapps. Let me give you some examples:
Keyless, a rising star in the field of passwordless authentication: using a combination of zero-knowledge bio-metric authentication and key management, Keyless helps replace passwords with just who you are.
Provable is a flexible open source oracle service that leverages secure enclaves and software-based isolation, very in line with the Oasis tech.
Bankex is a digital asset platform that wants to bring digital money to under-banked users via social networks and messaging platforms.
Totle is a liquidity-focused service that aggregates decentralized exchanges and synthetic asset providers to help source liquidity at the best price; additionally, users get insurance for up to 600 ETH via Nexus Mutual.
We have also signed, but not announced, partnerships with two big names — stay tuned!
Jon’s Question — What role does identity currently play or will play in the world of DeFi?
Luca — Authentication and Identity are fundamental elements of a financial system. Proof of attestation is necessary to show that you are who you say you are. Proof of completeness is equally important to prevent users from keeping their good and less good actions in separate places.
Oasis Network’s technology can allow users to be able to store their information in their own ‘capsule’ — a secure space that contains all the data they want.
When they need to prove something to someone, they can enable selective access: the requester would simply be able to interrogate the system and receive an answer without seeing the underlying data. This is very relevant because verticalized services can build on top of these capsules.
Jon’s Question — I read your blog on Data Yields. Can you explain that a bit more.
Luca — Every time you use an application, you generate some data that you leave with the application itself. You clearly derive some value out of the experience, but this is just a fraction of the value that data point has. Given that the data is stored in places you don’t have access to or control over, there’s nothing you can do about.
Now imagine a different scenario: whenever you generate data, this data goes into a ‘capsule’ that you control. The application through which you generate this information has ‘computation-only access’; every other application needs to request access to your capsule. What’s particularly interesting is that the data is not transferred anymore, but it’s only available in a secure environment that only allows some computation on the data but never reveals the data itself.
With this model then you can “charge” or earn some value from your data, which we call a Data Yield. (let me repost the link for people who haven’t read it) Medium Link
Jon Question — Will yield farming be possible on the Oasis Network?
Luca — Absolutely. Being able to execute many transactions and keeping transactions private create a much more efficient market because participants would follow rational economic principles instead of micro bubbles.
We are already working with top projects to understand how to use privacy to bring more people to DeFi: privacy should be an incentive.
SEGMENT 2
Question — Will Oasis provide oracle solutions to DeFi projects?
Luca — We have built partnerships with oracle providers. Provable is a flexible open source oracle service that leverages secure enclaves and software-based isolation, very in line with the Oasis tech. We have also signed, but not announced, a partnership with a big big name — stay tuned!
Question — I’ve seen Oasis use both the terms Open Finance and DeFi. What’s the difference?
Luca — They’re interchangeable. However, we think that “Open” Finance better represents the idea that the new financial system should be accessible to everyone who respects the conditions, regardless their status, wealth, or geography.
Question — And how will Oasis be a part of that (DeFi)? By offering its service to current DeFi protocols and/or offering its own DeFi solutions? And does Oasis have partners that can facilitate DeFi? In regards to payment, custodial, liquidity, KYC, stablecoins?
Luca — We have built partnerships with players in each category. You can see a DeFi application as a combination of different blocks (oracles, liquidity, exchanges, wallets, on/off ramp, etc.).
At the same time, we are working with existing players to bring them on our network. We keep hearing that privacy is the next big thing in DeFi.
Question — What aspects of DeFi require privacy? As Oasis pertains to privacy first approach.
Luca — The current generation of DeFi is causing some miners and traders to leverage the inefficiencies of Ethereum to stack mining fees and interest rates, while preventing many more people from joining the industry: in this sense, privacy has a strong role in making the network function properly.
At application level, privacy is an enabler. I can point at so many benefits, one I love is that privacy encourages the participation of institutions in the system because these institutions would be able to protect their interests and relationships.
Additionally, privacy helps create a reputation system, hence enabling under collateralization of lending. If there’s interest, I can talk about this.
Question — How will privacy combine with Open Money&Finance? Isn’t it opposite? Examples will be useful. Thanks.
Luca — The current financial or data systems are not open because they are limited to few. Privacy has a much broader meaning than ‘just’ keeping something private. Thanks to privacy-preserving computation, users can retain ownership of their information and give access to compute on the data without actually revealing (hence transferring) the data.
Open Finance refers to the idea that status, wealth, and geography won’t block you from accessing a certain financial product; the adherence to a programmable set of conditions will determine whether you can participate or not.
Question — How do you think building privacy-preserving applications will contribute to the development of the Crypto world and other sectors. Including finance, health and others?
Luca — At the beginning, Companies/Platforms are incentivized to cooperate with their users as a way to attract them. As these companies grow, they tend to exploit more and more value (data) from their users because it’s harder for the user to switch to a smaller player. The fact that data is transferred from the user to the company leaves the user outside of the value capture cycle. Blockchain is bringing incentives to the bottom layer (the protocol layer). We think bringing incentives at application layer is also extremely important to enable data-based collaborations between companies and their users.
Regarding Open Finance, the absence of privacy (and scalability) is pushing miners and traders to adopt techniques that maximize their short term return but block mainstream adoption.
Question — Why would anyone choose building a DeFi project on Oasis over Ethereum? Considering the substantial traction that Ethereum DeFi projects have gained in the last 2 months.
Luca — I think the answer to this question has two components. 1.) The technical point of view and 2.) the presence of liquidity.
Technical point of view:
In the short term, we are seeing how the slow speed of Ethereum is causing miners and yield farmers to create a ‘fee market’: being able to execute a few transactions only and the fact that the transaction is visible to everyone creates the perfect situation for a few people to skew the system towards their own financial incentives — a few risk takers profit from this inefficiency (stacking yields) and prevent DeFi developers from building mainstream applications. The Oasis Network has a strong advantage here.
Liquidity:
I agree Eth has an advantage. However, just remember that 1.) the current DeFi space is still extremely small relative to blockchain and relative to FinTech and 2.) blockchains will become interoperable going forward (Oasis itself will have interoperability too).
Question — Hmmm… scalability will inevitability be solved? I don’t think it’s enough. There’s loads of scalable blockchains out there.
Luca — Some players are focused on scalability; others are focused on privacy. Oasis is focusing on both, using techniques that have been developed in research labs at UC Berkeley, Stanford, and elsewhere.
As we heard in the last AMA our design allows for the execution of smart contracts that keep the data private and confidential without sacrificing the ability to compute on the data itself.
We think that number of transactions is an imperfect metric because it doesn’t account for how complex the transaction is. Completing a payment is very different from running a machine learning model for example.
Question — Hello… Extensible is among the design goals of the oasis network…please can you throw more light
Luca — Unlike scalability, which is focused on throughput, the Oasis Network is extensible in the sense that you can build custom computer environments for specific use cases. For example, you can build a specific paratime just for Collateralized Loans
Question — What makes Oasis DeFi stand out from other Defi?
Luca — You can find part of the answer in previous answers.
Another part of the answer highly depends on what time horizon you are interested in. In the short term, we are seeing how the slow speed of Ethereum is causing miners and yield farmers to create a ‘fee market’: being able to execute a few transactions only and the fact that the transaction is visible to everyone creates the perfect situation for a few people to skew the system towards their own financial incentives — a few risk takers profit from this inefficiency (stacking yields) and prevent DeFi developers from building mainstream applications. The Oasis Network has a strong advantage here.
As I said in one of the previous answers, many projects are solving the scalability piece but the Oasis Network is uniquely positioned to solve scalability AND privacy.
Question — What will Oasis bring to DeFi that no one else is working on at the moment or is able to achieve? What will be your breakthrough innovation?
Luca — You can find the answer to the first part of the question above (or ping me).
Regarding the breakthrough innovation, that’s how I see it. The status quo is that there are two ways to deal with data: 1) not revealing your data to anyone, hence not being able to consume a certain service OR 2) revealing the data and losing ownership.
We introduce a third option: share/use your data but retain ownership/control. This is breakthrough. It enables use cases and new collaboration models that were not possible: in addition, it enables ‘data owners’ to ‘stake’ their data and earn a yield. I wrote a blogpost in case you are curious: Medium Link
Question — How will the Oasis token/coin be used in the network when it is launched?
Luca — The token is used to run the consensus layer of the network. It can be used for staking, delegation, and gas.
We are working on a number of partnerships that expand the utility of the token (bridge, DeFi, incentives for users to store their data on the network, etc)
SEGMENT 3
Question — I’m curious who will be running all these paratimes? Can anyone run what ever ones they want? Can one node run more than 1 paratime?
Raman — The network is agnostic in this regard. Anyone can run a ParaTime. It is completely left up to the devs and users to see which ones provide the functionality that they need.
Question — When Mainnet?
Anne — Working on it. We just started collecting final entity packages / wallet addresses from validators TODAY and will for a few weeks, then it’s on to building the genesis file, reviewing it as a community, and then if all goes well
Question — Could a dev make paratime that is permissioned? Meaning only certain people can run those paratime nodes
Raman — Totally. For instance there may be a consortium of partners that run a permissioned runtime using the consensus layer to persist select pieces of information for audits etc.
Question — Hi, I have been reading through the AMA. On which (side)chain are you building? The remainder is pretty clear to me at the moment
Raman — We are a layer 1 protocol and the ParaTime architecture enables us to scale without sidechains. For more information please refer to our platform whitepaper on the foundation website.
For more information and resources, visit:
Oasis Protocol official website
